The multifaceted impact of US trade policy on financial markets

Arbeitspapier

We study the multifaceted effects of trade policy shocks on financial markets using a structural vector autoregression identified via event day heteroskedasticity. We find that restrictive US trade policy shocks affect US and international stock prices heterogeneously, but generally negatively. They increase market uncertainty, lower US interest rates, and lead to an appreciation of the US-Dollar. The effects are significant for several weeks or quarters. Decomposing the trade policy shocks further suggests that trade policy uncertainty dominates tariff level effects. Chinese trade policy shocks against the US further hurt US stocks.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: DIW Discussion Papers ; No. 1956

Classification and Topics

• Classification: Wirtschaft ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; Trade Policy; International Trade Organizations ; International Conflicts; Negotiations; Sanctions ; General Financial Markets: General (includes Measurement and Data)
• Subject: Trade policy shock ; structural VAR ; stock prices ; exchange rates ; interest rates ; heteroskedasticity

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Boer, Lukas ; Menkhoff, Lukas ; Rieth, Malte
• Event: Veröffentlichung
• (who): Deutsches Institut für Wirtschaftsforschung (DIW)
• (where): Berlin
• (when): 2022

Further information

• Handle: http://hdl.handle.net/10419/259822
• Last update: 10.03.2025, 11:43 AM CET